Described by Vernor Vinge, crypto-anarchy is more specifically anarcho-capitalist, employing cryptography to enable individuals to make consensual economic arrangements and to transcend national boundaries.[1]

By using cryptographic software, the association between the identity of a certain user or organization and the pseudonym they use is made difficult to find, unless the user reveals the association. It is difficult to say which country's laws will be ignored, as even the location of a certain participant is unknown. However, participants may in theory voluntarily create new laws using smart contracts or, if the user is pseudonymous, depend on online reputation.

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The "crypto" in crypto-anarchism should not be confused with the use of the prefix "crypto-" to indicate an ideology or system with an intentionally concealed or obfuscated "true nature". For example, some would use the term "crypto-fascist" to describe an individual or organization that holds fascist views and subscribes to fascist doctrine but conceals their agenda so long as these doctrines remain socially unacceptable. However, Timothy C. May's "Cyphernomicon" indicates that the term "crypto-anarchist" was partially intended as a pun on this usage, even though he did not intend to conceal his beliefs or agenda.[2]

A second concern is evasion of censorship, particularly Internet censorship, on the grounds of freedom of expression. The programs used by crypto-anarchists often make it possible to both publish and read information off the internet or other computer networks anonymously. For example, Tor, I2P, Freenet and many similar networks allow for anonymous "hidden" webpages only accessible by users of these programs, while projects like Bitmessage allow for anonymous messaging system intended to be a substitute for email. This helps whistleblowers and political opposition in oppressive nations to spread their information.

Crypto-anarchists argue that without encryption abilities, messages, personal information, and private life would be seriously damaged. They argue that a ban on cryptography is equal to the eradication of secrecy of correspondence. They argue that only a draconianpolice-state would criminalize cryptography. It is already illegal to use it in some countries, and export laws are restrictive in others. Citizens in the United Kingdom must, upon request, give keys for decryption of personal systems to authorities. Failing to do this can result in imprisonment for up to two years, without evidence of other criminal activity.[3]

This legislative key-surrender tactic can be circumvented using automatic rekeying of secure channels through rapid generation of new, unrelated public and private keys at short intervals. Following rekeying, the old keys can be deleted, rendering previously used keys inaccessible to the end-user, and thus removing the user's ability to disclose the old key, even if they are willing to do so. Technologies enabling this sort of rapidly rekeyed encryption include public-key cryptography, hardware PRNGs, perfect forward secrecy, and opportunistic encryption. The only ways to stop this sort of cryptography is to ban it completely (any such ban would be unenforceable for any government that is not totalitarian, as it would result in massive invasions of privacy, such as blanket permission for physical searches of all computers at random intervals), or otherwise raise barriers to its practical use (be they technological or legal). Such barriers represent a difficulty and risk to the users of such cryptographic technology which would limit and potentially prevent its widespread adoption. Generally, it is the threat of prosecution which limits the use and proliferation of a technology more so than the ease-of-use of a technology in and of itself.

Crypto-anarchism is an ideology that seeks to create and deploy information infrastructure that, by design, is unable to comply with authoritarian requests to break the participating individuals' secrecy of correspondence.

Crypto-anarchism relies heavily on plausible deniability to avoid censorship. Crypto-anarchists create this deniability by sending encrypted messages to interlinked proxies in computer networks. With the message a payload of routing information is bundled. The message is encrypted with each one of the proxies and the receiver public keys. Each node can only decrypt its own part of the message, and only obtain the information intended for itself. That is, from which node it got the message, and to which node it should deliver the message. With only access to this information, it is thought to be impossible for nodes in the network to know what information they are carrying or who is communicating with whom. Peers can protect their identities from each other's by using reply onions, digital signatures, or similar technologies. Who originally sent the information and who is the intended receiver is considered infeasible to detect, unless the peers themselves wish to reveal this information. See onion routing for more information.

Thus, with multiple layers of encryption, it is effectively impossible to know who is connected to any particular service or pseudonym. Because summary punishment for crimes is mostly illegal, it is impossible to stop any potential criminal activity in the network without enforcing a ban on strong cryptography.

Deniable encryption and anonymizing networks can be used to avoid being detected while sharing illegal or sensitive information, that users are too afraid to share without any protection of their identity. The information being shared could be anything from anti-state propaganda, whistleblowing, narcotics distribution/trafficking, criminal activity, as well as reports from political dissidents or anonymous monetary transactions.

Untraceable, privately issued electronic money and anonymous Internet banking exists in these networks. Digital Monetary Trust and Yodelbank were examples of two such anonymous banks that were later put offline by their creators. eCache is a bank currently operating in the Tor network, and Pecunix is an anonymous (submitting personal information when opening an account is optional) gold bank operating on the Internet.

Ukash is an e-money network. Cash in amounts up to £500/€750 can be swapped for a 19-digit Ukash voucher in payment terminals and retail outlets.

Bitcoin is a currency generated and secured by peer-to-peer networked devices that maintain a communal record of all transactions within the system that can be used in a crypto-anarchic context. The idea behind bitcoin can be traced to Timothy C. May's 1988 publication The Crypto Anarchist Manifesto.[4]

Silk Road is an anonymous market operated using the Tor network. Similarly, Assassination Market is a Tor-based market operated by a self-described crypto-anarchist going by the pseudonym Kuwabatake Sanjuro.[5]

Anonymous trading is easier to achieve for information services that can be provided over the Internet. Providing physical products is more difficult as the anonymity is more easily broken when crossing into the physical world: The vendor needs to know where to send the physical goods. Untraceable money makes it possible to ignore some of the laws of the physical world, as the laws cannot be enforced without knowing people's physical identities. For instance, tax on income for online services provided via the crypto-anarchists networks can be avoided if no government knows the identity of the service provider.